Suppose a person has a single job with $80K salary for the year and chooses 30% contribution to their 401K. The limit for 2020 contributions is 19.5K.

Will the employer or the administrator stop withholding anything above 19.5K automatically or does the employee need to change/stop the contribution themselves?


26 USC 401(a)(30) requires that, for a plan to be a "qualified" plan, the plan must limit contributions for an employee for all plans under the same employer to the annual limit. So the plan is required to stop contributions when it reaches the limit.

Now, if you have multiple jobs and the contributions for each job are under the limit but the total is over, that is not the plan's fault and it is your responsibility to make sure your total is under the limit. But if a single plan (or plans from the same employer) allows contributions more than the limit, then that is their mistake and they must correct it, and the plan risks disqualification if they don't return excess contributions by April 15 of the next year.


They should stop the contributions for you, but mistakes happen, so employees should still check to make sure they haven't over-contributed.


The chance they deposit more than the limit is slim to none. The issue of depositing too much is with those who had 2 jobs over the year.

The warning I’d give you pertains to matching funds. With no percent limit in my deposit, I could have topped off my 401(k) by April or May. But, with no deposits, any potential matching was delayed until February of the next year, when these numbers were reconciled.


If the plan administrator withholds too much, the Plan Sponsor will refund the overage to the employee upon discovering the error in the annual plan review that is required by law, which usually takes place early in the following year. This will trigger an amended W2. If you have already filed your tax return when the error is discovered, you will have to file an amended return that reflects the additional taxable income. So it's best to speak up promptly if you notice that 401(k) withholding has gone over the limit.


I over-contributed about $2,000 in 2017, and I got penalized big-time by the IRS. My company and my tax accountant split the penalty, so I didn't have to pay the penalty. But everyone was so mad at the 401k administrator that they dropped the retirement provider for the whole company - all employees at our company were affected by the change in retirement provider.

I don't feel bad for the retirement company. I mean, what else are they doing if they are not checking the limits??? I only had one W-2 job at the time. The finance industry blows my mind.


It depends on if your company has any other process in place.

The plan at my job will continue to put money in, but anything in excess of the limit gets put into a an after-tax 401k account (not to be confused to the normal pre-tax 401k account that acts like an IRA). It is really annoying since there is no 'fixed per month' contribution option, and the percentage match from our company is applied per month, so if I were to max out my contribution prior to the end of the year, every month that I'm not contributing will not be counted toward the company match.

Similar example found in the thread at https://www.bogleheads.org/forum/viewtopic.php?t=133214

It depends on your employer. My employer put excess contributions beyond the pre-tax limit into after-tax 401k.

  • First, a Roth will be post-tax money. Second, the limit for 401(k) deposits is a total, between both flavors of account. I invite you to check your answer and edit in case you feel you didn’t present your position correctly. – JTP - Apologise to Monica Nov 11 '19 at 17:38
  • I think what our plan does is similar to what is discussed here bogleheads.org/forum/viewtopic.php?t=133214#p1964553, as quoted "It depends on your employer. My employer put excess contributions beyond the pre-tax limit into after-tax 401k." – Cinderhaze Nov 11 '19 at 18:50
  • Reading closer, it is an 'after tax 401k', not (directly) a roth 401k, but there is an option to convert/roll over to a roth. fidelity.com/viewpoints/retirement/401k-contributions – Cinderhaze Nov 11 '19 at 18:59
  • thebalance.com/… — does a good job explaining this as well. It’s akin to the non-deducted IRA. I’m personally not familiar with it, as my employer never offered this. – JTP - Apologise to Monica Nov 11 '19 at 19:06

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